Sustainable Growth. A firm has decided that its optimal capital structure is 100% equity-financed. It perceives its optimal dividend policy to be a 40% payout ratio. Asset turnover is sales/assets = .8, the profit margin is 10%, and the firm has a target growth rate of 5%. (LO18-3)

a) Is the firms target growth rate consistent with its other goals?

b) If not, what would asset turnover need to be to achieve its goals?

c) How high would the profit margin need to be instead?